Growth in Paying Users to Drive Dropbox's (DBX) Q2 Earnings

Dropbox DBX is scheduled to report second-quarter 2020 results on Aug 6.

Solid momentum of Dropbox’s new Desktop App amid evolving workspace demand for seamless enterprise communication tools is expected to have contributed to the second-quarter top line.

Moreover, increasing popularity of the latest Dropbox platform is instilling confidence in the stock. Notably, shares of the company have returned 29.3% in the year-to-date period compared with the industry’s rally of 16.4%. The company currently carries a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Click here to know how the company’s overall Q2 performance is expected to be.

Paying User Growth: A Key Catalyst

Coronavirus crisis induced work-from-home wave has triggered demand for cloud storage. Dropbox has been striving to enhance its platform to aid users to access, store, synchronize and share files, photos, videos, songs and spreadsheets.

The company has been witnessing surge in user base of Plus subscription plan for individuals, driven by strength in Smart Sync, Dropbox Rewind, and Dropbox Transfer features.

Propensity toward web-based learning has led to higher utilization of Dropbox Paper among higher-education institutions and universities. Professors are finding it convenient to use Dropbox Paper to enhance educational content by making it more engaging, collaborative and accessible for students.

In medical field, robust uptake of HelloWorks — a fully customizable document workflow solution — in processing patient intake forms for instance, is likely to have benefited second-quarter performance.

Moreover, strong strategic focus on product innovation and introduction of new features like Dropbox Passwords, Dropbox Spaces, and integration of HelloSign functionality might have contributed to growth in paying users.

In first-quarter 2020, paying users totaled 14.6 million, up 10.6% year over year. Notably, the Zacks Consensus Estimate for paying users, for second quarter, currently stands at 14.74 million, indicating year-over-year growth of 8.4%.

Dropbox, Inc. Revenue (Quarterly)

Dropbox, Inc. Revenue (Quarterly)

Dropbox, Inc. revenue-quarterly | Dropbox, Inc. Quote

Also, the company’s efforts to enable users utilize applications through multiple devices has been enhancing user experience. Further, integration with leading applications like Zoom Video ZM, Slack WORK and Atlassian TEAM may have led to increasing utilization of the platform. These factors are likely to get reflected in growth of average revenue per paying user.

In first-quarter 2020, average revenue per paying user was $126.30, compared with $121.04 in prior-year quarter. The consensus mark for the same is currently pegged at $127, compared with $120.48 reported in year-ago quarter.

Nevertheless, increasing investments in product enhancements amid stiff competition from services like Microsoft One Drive, Google Drive and Citrix ShareFile may have weighed on margin expansion in the second quarter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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